Rochester Business Journal Articles

The Armbruster Capital Management News & Education section of our website incorporates articles and newsletter specifically geared towards issues that our clients are facing today.

401(k) investor plans that use index funds save time and money

The share of 401(k) assets invested in index funds has risen from 17 percent in 2006 to 33 percent in 2016, a recent report from financial data firm Brightscope and the Investment Company Institute shows. While that is impressive growth, the share of retirement assets in index funds should be much larger, probably close to 100 percent.

Prospect of Lean Returns For Stocks, Bonds Suggest Getting Creative

Most investors have a mix of stocks and bonds in their portfolios. Stocks are there for long-term growth, whereas bonds are generally purchased for stability and income generation. This has worked out pretty well historically, as stock returns averaged over 10 percent annually since the 1920s, and bonds have yielded over 5 percent, according to Ibbotson data. A balanced portfolio of 60 percent in stocks and 40 percent in bonds has become the de facto standard for many investment portfolios, as the returns have been substantial enough to meet most investors’ returns, while keeping risk in check.

At This Stage of Economic Expansion, Is It Like 1996 or 1999

In a recent interview with CNBC, famed investor Warren Buffett marveled at the current economic environment. He not¬ed that unemployment is at multi-decade lows and the federal budget deficit is at an all-time high, yet inflation and interest rates are historically low. No economics textbook, in Buffett’s estimation, could have predicted such an environment.

Buy-and-rebalance Approach Best Course for Long-term Wealth

The current economic expansion is now 117 months old. Looking at data that goes back to 1854, this is just shy of the record 120-month expansion that occurred from 1991 to 2001. It seems likely we’ll soon exceed the prior record, but how long can the economy continue to grow, and how long can the stock market continue its associated bull run?

Dying Without a Will Could Cause Hardship for Heirs

Prince, or the artist formerly known as Prince, or whatever his name ultimately was, made headlines throughout his life for his talent and eccentricities. However, the headlines after his death in 2016 revolved around the fact that he died with an estimated $200 million estate and no documents in place to guide its disposition.

True Portfolio Diversification Involves Multiple Asset Classes

The diversification of an investment portfolio has been described as the one “free lunch” in the investment world. That is because holding a portfo¬lio of assets with unique risk and return characteristics can result in higher long-term returns and a lower risk profile.

Sensible Investment Strategies Can Help Weather Gloomy Market Forces

October has come and gone, which is likely a relief for investors. October gets a bad rap when it comes to the stock market, and perhaps deservedly so: It was October of 1929 when the slide into the Great Depression began in earnest with a 20 percent dip in the stock market. It was also October, in 1987, when Black Monday resulted in the stock market falling over 20 percent in a single day. October of 2008 saw stocks decline 17 percent.

Inverted Yield Curve May Not Always Signal Recession On The way

The stock market achieved an all-time high in late January, but then saw a subsequent drop of more than 10 percent. Since then, it has vacillated wildly, reacting to strong economic news, yet also showing signs of concern. The Fed has been raising short-term interest rates, and volatility has returned in earnest. This has set up a “Tale of Two Markets” scenario, which is making investors question if they should get out of stocks altogether.

Small-cap Value Stocks May Be The Way

Small-cap value stocks have been uniquely poor performers recently. They posted strong returns in 2016, but otherwise, each of the past seven years small-cap value stocks have either significantly lagged or just barely beaten large-cap growth stocks.

Rising Interest Rates Change Strategies for Investors

Stock and bond market investors watch with trepidation as the Federal Reserve Board determines how much to raise interest rates this year. The Fed has already taken short-term interest rates from roughly zero percent to a target of 1.50 percent to 1.75 percent, and promises further hikes throughout 2018.

Caution Flag is Up When Considering Purchase of an Annuity

Perhaps no financial product is more controversial than annuities. At best, an annuity is an insurance offering that provides a guaranteed stream of income that you cannot outlive. At worst, it is a high-cost way to earn subpar investment returns.

Certain Investors May Find Privately Traded REITS to Their Liking

With both stock and bond market valuations at lofty levels, many investors are starting to wonder if they will be able to continue to earn the types of returns they have enjoyed over the past nine years. Continued gains in the stock market would push valuations to potentially dangerous levels, and bond yields aren’t that far north of zero currently.

Bitcoin phenomenon illustrates importance of rational investing

As of this writing, cybercurrency Bitcoin has appreciated in value in excess of 1,500 percent so far this year. That makes it one of the best performing investments ever, even when considering tulip bulbs in 1636, stock in the South Sea Company in 1720, and internet stocks in the late 1990s. Most of the academic studies written on financial markets start with a few basic premises: investors are rational, they want to maximize returns, and they want to minimize risk. Is it possible that the move in Bitcoin is a rational response to new data that has emerged over the course of the past year? Probably not. Bitcoin remains largely the same from a structural standpoint today as it did a year ago.

Socially Responsible Investing in the US

Today, socially responsible investing, or SRI, accounts for around 25 percent of all managed assets in the U.S. The percentage is even higher in Europe and is rising fast in parts of Asia. SRI investing can take many forms, but the most popular is negative screening. That means excluding companies that participate in undesirable activities, such as the manufacture of tobacco products, weapons or fossil fuels. However…

Study of Stock Bubbles Debunks Theory of Impending Crash

Most of us have seen the recent headlines about the stock market hitting new highs. By some measures, stocks now trade at valuation levels only seen twice before: in 1929 and in 1999. If you recall, the aftermath of those periods was not terribly profitable for investors.

Stock Indices Important for Gauging Portfolio Performance

Several years ago, I worked with an investment adviser who did not like to show investment performance to his clients. In fact, he never even calculated returns for his managed accounts. He really had no idea or interest in how he was performing, and certainly did not want his clients questioning him about their returns.

Current Events, Even War, Not Good Basis for Investing

Back in 1970, Edwin Starr released a recording of the song “War.” The notable lyrics, “war/what is it good for/ absolutely nothing,” have been quoted often in the 40 years since. However, contrary to Starr’s lines, it turns out there may be one thing that war is indeed good for: the stock market.

2016 Shows Folly of Pundit Predictions

Last year was a year of surprises. Sure the Chicago Cubs won the World Series for the first time in 108 years, Brad Pitt and Angelina Jolie announced that they are dissolving their marriage, but I’m talking about more interesting topics, like those that impacted the capital markets.

Performance shades merits of active management

I come to praise active management, not to bury it. Active management has been much maligned recently, including in this column, because of the increasing dominance of index investing over active stock picking.

Indeed, according to estimates from Morningstar, actively managed U.S. stock funds have seen outflows of over $185 billion so far this year. By comparison, U.S. stock market index funds have attracted almost $125 billion in new assets. What’s driving this disparity?

Comparing index mutual funds and active managers

The index fund recently celebrated its 40th birthday. The Vanguard 500 Index Fund, the very first indexed mutual fund, began on Aug. 31, 1976. That might not seem like such a big deal, but consider that during a typical 10-year period, roughly half of all stock mutual funds close their doors. Merely surviving for 40 years is quite a feat, but the fact that the Vanguard 500 Index Fund is now among the largest mutual funds in the world makes it all the more impressive.

In fact, of the 25 largest mutual funds, all but 10 are index funds. Of the 10 non-index funds on the list, only six are actively managed.

Potential Brexit impact at least two years away

The year 1993 was a pivotal one in the entertainment world. The TV show “Friends” began filming that year and soon became a runaway success. The show launched Jennifer Aniston into mega-celebrity status. Because of her newfound fame, she came into contact with other A-list celebrities, and ultimately she married Brad Pitt.

Strategies that will help navigate a low-return market

Here’s a depressing thought: The expected net-of-fee, real return from a balanced portfolio of stocks and bonds is around 1.7 percent annually over the coming decade. Of course, that assumes you don’t pay taxes. If you do, the expected return is less. A recent study by consulting and research firm McKinsey Global Institute raised exactly this issue (though their numbers were a bit different), suggesting investors need to get used to lower returns. Others have made the same case.

New fiduciary standard cultivates consumer confusion

What do a rutabaga and a turnip have in common with your investments? Quite a lot, as it turns out.

For the past hundred years or so, as agricultural science progressed and found new ways to grow food more efficiently via the use of chemicals, a small organic food movement has persisted. Proponents of the movement argued that chemically or genetically adulterated food was unhealthy and potentially dangerous.

Don’t throw in the towel; you can navigate volatility

Don’t throw in the towel; you can navigate volatility On Aug. 24, the Dow Jones Industrial Average fell more than 1,000 points within the day. This sort of volatility is what makes investors nervous—and question their commitment to their long-term investment strategies. Selling out of the market during downturns, however, is one of the most damaging actions an investor can take.

Are you sure your adviser acts in your best interest?

Imagine: You are ill and go to your doctor for help. Unbeknownst to you, your doctor is on the payroll of a pharmaceutical firm, and he gets a cut of all the sales he makes of a particular drug. You describe your symptoms, and the doctor prescribes medication.

Retirement plans don’t have to cause headaches

Many organizations view retirement plans as a necessary evil. These plans may help attract and retain talent, but they can also be expensive, time-consuming, and difficult to monitor and administer. As a result, corporate retirement plans are often ignored by those who oversee them.

Seeking income? Chasing yields can be tricky territory

Income-producing investments, bonds producing a lot of interest income and stocks paying large dividends have been on a tear over the last few years.

With yields on bonds falling to all-time lows, investors seeking income from their portfolios have been turning to master limited partnerships, real estate investment trusts, junk bonds and stocks with large dividend yields.

A little planning can bring you significant savings

Year end is right around the corner—a time when a young man’s fancy lightly turns to thoughts of, well, tax planning.

For most of us, the thought of tax planning is enough to either make us glaze over in a daze of boredom and confusion or send us screaming for the exits as we wait for the annual fleecing by the tax man.

Break free from the traps of the investment world

Question: What do you call an economist with a forecast? Answer: Wrong. We are constantly inundated with forecasts from “the experts.” This is true not only from economists but also from political pundits, Fed watchers, stock market strategists and other prognosticators.

Stick to basics; they go a long way toward meeting objectives

The world is full of investment pornography. This is a term coined by a mutual fund marketing executive I know to describe misleading claims in the investment industry. One such claim is that smart, hard-working investment managers with cutting-edge technology can outperform the market by actively trading stocks or other investments. Although it seems intuitive that this approach would produce positive results, the evidence indicates differently.

Downturns can be scary but also ripe with opportunity

Given the length of the current stock market rally and the level stock market valuations have reached, there is a large and growing consensus that the next downturn is right around the corner.

Many believe that rather than just a modest decline, the next downturn will be another sharp, painful correction, similar to what we experienced in 2008.

Don’t fear end of market highs; keep long-term view

Is the stock market overvalued and ready to crash?

I have fielded a lot of questions lately on just that topic. Typically, investors get uneasy when the stock market declines in value. However, with visions of 2008 still in our heads, many investors are increasingly nervous as stocks continue to make new highs.

For investors, asset diversification pays off if you do it right

Individual investors make bad decisions. That is the conclusion of a recent study, showing that 401(k) plan investors are increasingly tilting their accounts toward stocks although stock market valuations have risen significantly.

High fees, expenses and taxes can drain long-term returns

With winter finally winding down and the holidays squarely behind us, I’d like to say something very Grinchy: It is actually better to receive than to give. This may sound like blasphemy, particularly in Rochester, a city renowned for its philanthropy. But I’m not talking about charitable giving. I’m talking about your investment portfolio.

Bonds are boring but can be a secure bet in uncertain times

I ’ve said it before: No one likes bonds. They’re boring, they don’t have much opportunity to appreciate in value, they can be rather complicated and their income is generally subject to unfavorable tax rates.

Investing for Income? Don’t Give In to Temptation of Risk

It may be blasphemy, but I’m going to say it anyway: I don’t like dividends.

It is difficult to open an investment magazine or newspaper these days without seeing an article on the merits of generating investment income. The main argument usually is that since the largest part of our population is at or nearing retirement, investors will need to begin drawing income from their investments to meet their living expenses.